10-Q 1 fund810q1-2001.txt REPORT FOR THE FIRST QUARTER OF 2001 Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended March 31, 2001 |_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from _______ to _______ Commission File Number 333-62477 ATEL Capital Equipment Fund VIII, LLC (Exact name of registrant as specified in its charter) California 94-3307404 ---------- ---------- (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 235 Pine Street, 6th Floor, San Francisco, California 94104 (Address of principal executive offices) Registrant's telephone number, including area code: (415) 989-8800 Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| DOCUMENTS INCORPORATED BY REFERENCE None 1 Part I. FINANCIAL INFORMATION Item 1. Financial Statements. 2 ATEL CAPITAL EQUIPMENT FUND VIII, LLC BALANCE SHEETS MARCH 31, 2001 AND DECEMBER 31, 2000 (Unaudited) ASSETS 2001 2000 ---- ---- Cash and cash equivalents $ 4,861,280 $ 2,484,785 Accounts receivable 4,063,885 5,339,569 Other assets 107,500 115,000 Investments in leases 204,689,972 190,893,298 ------------------ ----------------- Total assets $213,722,637 $198,832,652 ================== ================= LIABILITIES AND MEMBERS' CAPITAL Long-term debt $90,415,000 $86,668,000 Non-recourse debt 6,298,057 7,325,744 Line of credit 11,223,497 - Accounts payable: Managing Member 612,706 695,548 Other 356,332 485,895 Accrued interest payable 215,367 267,823 Unearned operating lease income 2,385,323 2,051,141 ------------------ ----------------- Total liabilities 111,506,282 97,494,151 Members' capital: Managing member - - Other members 102,216,355 101,338,501 ------------------ ----------------- Total members' capital 102,216,355 101,338,501 ------------------ ----------------- Total liabilities and members' capital $213,722,637 $198,832,652 ================== ================= See accompanying notes. 3 ATEL CAPITAL EQUIPMENT FUND VIII, LLC STATEMENT OF OPERATIONS THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000 (Unaudited)

STATEMENT OF CHANGES IN MEMBERS' CAPITAL THREE MONTH PERIOD ENDED MARCH 31, 2001 (Unaudited)

See accompanying notes. 4 ATEL CAPITAL EQUIPMENT FUND VIII, LLC STATEMENT OF CASH FLOWS THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000 (Unaudited)

See accompanying notes. 5 ATEL CAPITAL EQUIPMENT FUND VIII, LLC NOTES TO FINANCIAL STATEMENTS MARCH 31, 2001 (Unaudited) 1. Summary of significant accounting policies: Interim financial statements: The unaudited interim financial statements reflect all adjustments which are, in the opinion of the managing member, necessary to a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim financial statements should be read in conjunction with the most recent report on Form 10K. 2. Organization and Company matters: ATEL Capital Equipment Fund VIII, LLC. (the Company), was formed under the laws of the State of California on July 31 , 1998, for the purpose of acquiring equipment to engage in equipment leasing and sales activities. Contributions in the amount of $600 were received as of October 7, 1998, $100 of which represented the Managing Member's (ATEL Financial Corporation's) continuing interest, and $500 of which represented the Initial Members' capital investment. Upon the sale of the minimum amount of Units of Limited Liability Company interest (Units) of $1,200,000 and the receipt of the proceeds thereof on January 13, 1999, the Company commenced operations. The Company does not make a provision for income taxes since all income and losses will be allocated to the Partners for inclusion in their individual tax returns. 3. Investment in leases: The Company's investment in leases consists of the following:

6 ATEL CAPITAL EQUIPMENT FUND VIII, LLC NOTES TO FINANCIAL STATEMENTS MARCH 31, 2001 (Unaudited) 3. Investment in leases (continued): Operating leases: Property on operating leases consists of the following:

Direct financing leases: As of March 31, 2001, investment in direct financing leases consists office automation equipment, point of sale equipment, over the road trailers and hotel laundry equipment. The following lists the components of the Company's investment in direct financing leases as of March 31, 2001: Total minimum lease payments receivable $14,529,379 Estimated residual values of leased equipment (unguaranteed) 4,836,824 ------------------ Investment in direct financing leases 19,366,203 Less unearned income (3,387,137) ------------------ Net investment in direct financing leases $15,979,066 ================== All of the property on leases was acquired in 1999, 2000 and 2001. 7 ATEL CAPITAL EQUIPMENT FUND VIII, LLC NOTES TO FINANCIAL STATEMENTS MARCH 31, 2001 (Unaudited) 3. Investment in leases (continued): At March 31, 2001, the aggregate amounts of future minimum lease payments are as follows: Direct Year ending Operating Financing December 31, Leases Leases Total ------------ ------ ------ ----- 2001 $25,835,431 $ 2,863,965 $28,699,396 2002 31,196,489 3,056,394 34,252,883 2003 24,910,294 2,749,336 27,659,630 2004 15,446,091 1,938,018 17,384,109 2005 11,080,700 1,901,704 12,982,404 Thereafter 15,973,149 2,019,962 17,993,111 ------------------ ----------------- ------------------ $124,442,154 $14,529,379 $138,971,533 ================== ================= ================== 4. Non-recourse debt: At March 31, 2001, non-recourse debt consists of notes payable to financial institutions. The notes are due in varying quarterly and semi-annual payments. Interest on the notes is at rates from 7.98% to 14.0%. The notes are secured by assignments of lease payments and pledges of assets. The notes mature from 2001 through 2004. Future minimum payments of non-recourse debt are as follows: Year ending December 31, Principal Interest Total ------------ --------- -------- ----- 2001 $ 283,092 $ 462,830 $ 745,922 2002 312,109 515,608 827,717 2003 397,915 483,017 880,932 2004 4,425,556 170,437 4,595,993 2005 418,256 77,737 495,993 Thereafter 461,129 34,866 495,995 ------------------ ----------------- ------------------ $ 6,298,057 $ 1,744,495 $ 8,042,552 ================== ================= ================== 8 ATEL CAPITAL EQUIPMENT FUND VIII, LLC NOTES TO FINANCIAL STATEMENTS MARCH 31, 2001 (Unaudited) 5. Other long-term debt: In 1999, the Company entered into a $70 million receivables funding program (the Program) (which was subsequently increased to $125 million) with a receivables financing company that issues commercial paper rated A1 by Standard and Poors and P1 by Moody's Investor Services. Under the Program, the receivables financing company receives a general lien against all of the otherwise unencumbered assets of the Company. The Program provides for borrowing at a variable interest rate (5.74571% at March 31, 2001). The Program requires the Managing Member to enter into various interest rate swaps with a financial institution (also rated A1/P1) to manage interest rate exposure associated with variable rate obligations under the Program by effectively converting the variable rate debt to fixed rates. As of March 31, 2001, the Company receives or pays interest on a notional principal of $90,415,000, based on the difference between nominal rates ranging from 5.91% to 7.50% and the variable rate under the Program. No actual borrowing or lending is involved. The last of the swaps terminates in 2009. The differential to be paid or received is accrued as interest rates change and is recognized currently as an adjustment to interest expense related to the debt. Borrowings under the Program are as follows: Original Balance Rate on Amount December 31, Interest Swap Date Borrowed Borrowed Agreement ------------- -------- --------- 11/11/1999 $20,000,000 $13,868,000 6.840% 12/21/1999 20,000,000 17,956,000 7.410% 12/24/1999 25,000,000 19,169,000 7.440% 4/17/2000 6,500,000 5,636,000 7.450% 4/28/2000 1,900,000 1,498,000 7.720% 8/3/2000 19,000,000 17,270,000 7.500% 10/31/2000 7,500,000 6,950,000 7.130% 1/29/2001 8,000,000 8,068,000 5.910% ----------------- ------------------ $107,900,000 $90,415,000 ================= ================== Other long-term debt borrowings mature from 2004 through 2009. Future minimum principal payments of long-term debt are as follows: Year ending December 31, Principal Interest Total ------------ --------- -------- ----- 2001 $14,966,000 $ 4,432,684 $19,398,684 2002 20,066,000 4,652,870 24,718,870 2003 17,871,000 3,276,353 21,147,353 2004 12,252,000 2,164,661 14,416,661 2005 8,404,000 1,398,583 9,802,583 Thereafter 16,856,000 1,403,642 18,259,642 ------------------ ----------------- ------------------ $90,415,000 $17,328,793 $107,743,793 ================== ================= ================== 9 ATEL CAPITAL EQUIPMENT FUND VIII, LLC NOTES TO FINANCIAL STATEMENTS MARCH 31, 2001 (Unaudited) 6. Related party transactions: The terms of the Limited Company Operating Agreement provide that the Managing Member and/or Affiliates are entitled to receive certain fees for equipment acquisition, management and resale and for management of the Company. The Limited Liability Company Operating Agreement allows for the reimbursement of costs incurred by the Managing Member in providing services to the Company. Services provided include Company accounting, investor relations, legal counsel and lease and equipment documentation. The Managing Member is not reimbursed for services where it is entitled to receive a separate fee as compensation for such services, such as acquisition and management of equipment. Reimbursable costs incurred by the Managing Member are allocated to the Company based upon actual time incurred by employees working on Company business and an allocation of rent and other costs based on utilization studies. Substantially all employees of the Managing Member record time incurred in performing services on behalf of all of the Companies serviced by the Managing Member. The Managing Member believes that the costs reimbursed are the lower of (i) actual costs incurred on behalf of the Company or (ii) the amount the Company would be required to pay independent parties for comparable services in the same geographic location and are reimbursable in accordance with the Limited Liability Company Operating Agreement. The Managing Member and/or Affiliates earned fees, commissions and reimbursements, pursuant to the Limited Liability Company Agreement as follows:

10 ATEL CAPITAL EQUIPMENT FUND VIII, LLC NOTES TO FINANCIAL STATEMENTS MARCH 31, 2001 (Unaudited) 7. Member's capital: As of March 31, 2001, 13,570,188 Units ($135,701,880) were issued and outstanding. The Company is authorized to issue up to 15,000,050 Units, including the 50 Units issued to the initial members. The Company's Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Members and 7.5% to the Managing Member. 8. Line of credit: The Company participates with the Managing Member and certain of its Affiliates in a $62,000,000 revolving credit agreement with a group of financial institutions which expires on April 12, 2002. The agreement includes an acquisition facility and a warehouse facility which are used to provide bridge financing for assets on leases. Draws on the acquisition facility by any individual borrower are secured only by that borrower's assets, including equipment and related leases. Borrowings on the warehouse facility are recourse jointly to certain of the Affiliates, the Company and the Managing Member. At March 31, 2001, the Company had borrowings of $11,223,497 under the line of credit. The credit agreement includes certain financial covenants applicable to each borrower. The Company was in compliance with its covenants as of March 31, 2001. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Capital Resources and Liquidity During the first quarter of 2001, the Company's primary activities was engaging in equipment leasing activities. During the funding period, the Company's primary source of liquidity is subscription proceeds from the public offering of Units. The liquidity of the Company will vary in the future, increasing to the extent cash flows from leases exceed expenses, and decreasing as lease assets are acquired, as distributions are made to the members and to the extent expenses exceed cash flows from leases. As another source of liquidity, the Company has contractual obligations with a diversified group of lessees for fixed lease terms at fixed rental amounts. As the initial lease terms expire the Company will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on the Managing Member's success in re-leasing or selling the equipment as it comes off lease. The Company participates with the Managing Member and certain of its affiliates in a $62,000,000 revolving line of credit with a financial institution. The line of credit expires on April 12, 2002. The Company anticipates reinvesting a portion of lease payments from assets owned in new leasing transactions. Such reinvestment will occur only after the payment of all obligations, including debt service (both principal and interest), the payment of management and acquisition fees to the Managing Member and providing for cash distributions to the Limited Partners. The Company currently has available adequate reserves to meet contingencies, but in the event those reserves were found to be inadequate, the Company would likely be in a position to borrow against its current portfolio to meet such requirements. The Managing Member envisions no such requirements for operating purposes. No commitments of capital have been or are expected to be made other than for the acquisition of additional equipment. Such commitments totaled approximately $3,300,000 as of March 31, 2001. If inflation in the general economy becomes significant, it may affect the Company inasmuch as the residual (resale) values and rates on re-leases of the Company's leased assets may increase as the costs of similar assets increase. However, the Company's revenues from existing leases would not increase, as such rates are generally fixed for the terms of the leases without adjustment for inflation. If interest rates increase significantly, the lease rates that the Company can obtain on future leases will be expected to increase as the cost of capital is a significant factor in the pricing of lease financing. Leases already in place, for the most part, would not be affected by changes in interest rates. Cash Flows During the first quarter of 2001, the Company's primary source of liquidity was rents from operating leases. During the first quarter of 2000, the Company's primary source of liquidity was the proceeds of its offering of Units. In 2001 and 2000, the primary source of cash from operations was rents from operating leases. Operating leases are expected to remain as the primary source of cash from operations in future periods. 12 In 2001, the Company sold a large rail car fleet. The proceeds from that sale constituted the primary source of cash from investing activities in 2001. in 2000, rents from direct financing leases were the primary source of cash from investing activities. Uses of cash for investing activities consisted of cash used to purchase operating and direct financing lease assets and payments of initial direct costs associated with the lease asset purchases. In 2001, the only sources of cash from financing activities were borrowings under the line of credit and proceeds of long-term debt. In 2000, the primary source of cash from financing activities was the proceeds of the Company's public offering of Units of Limited Liability Company interest. Financing uses of cash included payments of syndication costs associated with the offering, repayments of debt and distributions to the members. Results of operations Operations resulted in net income of $4,225,174 in 2001 compared to a net loss of $907,756 in 2000. In 2001 and 2000, the Company's primary source of revenues was from operating leases. Depreciation is related to operating lease assets and thus, to operating lease revenues. It has increased as a result of operating lease asset acquisitions over the last year. Asset management fees are based on the gross lease rents of the Company plus proceeds from the sales of lease assets. They are limited to certain percentages of lease rents, distributions to members and certain other items. As assets are acquired, lease rents are collected and distributions are made to the members, these fees are expected to increase. Interest expense has increased from $1,522,340 in 2000 to $3,565,545 in 2001 as a result of increased debt balances in 2001 compared to those in 2000. 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings. Inapplicable. Item 2. Changes In Securities. Inapplicable. Item 3. Defaults Upon Senior Securities. Inapplicable. Item 4. Submission Of Matters To A Vote Of Security Holders. Inapplicable. Item 5. Other Information. Inapplicable. Item 6. Exhibits And Reports On Form 8-K. (a)Documents filed as a part of this report 1. Financial Statements Included in Part I of this report: Balance Sheets, March 31, 2001 and December 31, 2000. Statement of operations for the three month periods ended March 31, 2001 and 2000. Statement of changes in partners' capital for the three month period ended March 31, 2001. Statements of cash flows for the three month periods ended March 31, 2001 and 2000. Notes to the Financial Statements 2. Financial Statement Schedules All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. (b) Report on Form 8-K None 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 11, 2001 ATEL CAPITAL EQUIPMENT FUND VIII, LLC (Registrant) By: ATEL Financial Corporation Managing Member of Registrant By: /s/ Dean L. Cash ------------------------------------ Dean L. Cash President and Chief Executive Officer of Managing Member By: /s/ Paritosh K. Choksi ------------------------------------- Paritosh K. Choksi Principal financial officer of registrant By: /s/ Donald E. Carpenter ------------------------------------- Donald E. Carpenter Principal accounting officer of registrant 15

ATEL CASH DISTRIBUTION FUND IV L P 10-Q